About no-commission brokers

Why do traders opt for no-commission brokers when it’s an open secret that there is nothing “free” in trading? And you end up paying more in terms of wide spreads and other trading restrictions?


In fact as far as a trade’s overall cost is concerned, a broker offering tight spread and a small commission turns out to be better and pocket-friendly than his non-commission contemporary.

There can’t be a better hoax than no-commission. Everyone here knows that a broker earns by setting up a market for himself while earning a profit when the trader loses. In simple terms, whenever the trader loses, it’s the broker who makes the profit.

Is it true that a broker can charge both commission and a spread on a trade?

Is it true that a broker can charge both commission and a spread on a trade?

It should be one or the other.

If a forex broker is charging a commission, it implies it’s passing the spread it pays to its hedging counterparty to you with no additional markup.

The fee is on a “per million” basis and usually depends on monthly trading volume, meaning the more you trade, the lower your commission.

For example, if you trade less than $100M, per month, your commission for trades might be $80 per million traded.

But If you trade $600M per month, your commission for trades would be lower at say $40 per million traded.

That said, most retail forex traders don’t trade that large so evaluating a broker based on “low commission” doesn’t really make sense.

Trading $100M volume a month, which is considered on the low end, means that you’d need to trade at least 1,000 standard lots per month.

Even just trading 1 standard lot (100,000 units), which is the minimum trade size, is too big for a lot of retail traders.

(If you’re being charged a commission on smaller sizes, I’d be suspicious.)

This isn’t necessarily true. While a retail forex broker acts as a principal or is your counterparty, there are ways for a broker to execute your orders that mitigate conflict of interest (i.e. you lose, it wins). It depends on the broker.

There are brokers who claim to bid commission-free trade. In reality though, they make commission by widening the spreads.

No matter whether you gain or lose from the trade, these no-commission brokers will eventually make money from the commission and fees, most of them hidden. This you’ll realize when you end up paying more than what you earned. Or despite having a successful trade and a good profit at that, you don’t get much in your kitty.

I agree, and that’s why it becomes critical to choose the right broker. I have read on forums many new traders finding no difference in the brokers, that I think is a dangerous sign.

I do not think any broker will offer no commission account, because commission is basically the fees which a broker charges for providing trading services. I think this is a genuine fee which a broker charges from their end, it shouldn’t be very high though.

No commission accounts are available but there is always a hidden cost. No broker will provide a free service. Everyone has to put food on their table. You need to understand that.

If you ask me, the no-commission tag is just a satisfaction for the traders who think they’ll end up saving more. Instead one should rather go for a broker who clearly states the commission he’ll be seeking, may be in return for executing the buy or sell orders. Having a better clarity is always great. That’s what I liked about turnkey forex. They’ve mentioned seeking $1 commission per lot for ECN accounts with an average spread of 0.2 pips. Same is with fxtm, very clearly $2 stated commission.

Don’t forget that commission varies according to the volume. As a matter of fact, the bigger the volume, the bigger the commission sought.

check out with your broker. There are numerous types of commissions charged like fixed, variable, and per-trade percentage based commission.

So true. But at times, traders use non commissioned brokers due to lack of options.

My broker in fact offers many analytical tools that do justify the higher spreads or the commission rate that he charges.

How so? There are plenty legit options among commission brokers to choose from if that’s what you’re talking about in terms of options

Whosoever he pays, don’t worry me until I’m clear that a particular amount (that he’s mentioned on the website) is what I’ll be paying.

Plus, how bad will it be if I get to decide whether you want to work with the large volumes and low spreads along with commission costs in a conventional market.

Exactly and that’s what brokers charging commission would do.

I would not mind paying commission if that determines the amount of profit or loss I’m going to make. Turnkey forex in such a scenario charging $1 per lot for an ECN account suits me. The charts indicate the move above the spread and help me register profits.

Same is the case with IC markets. I traded with the broker knowing that it seeks fixed commission rather than artificially widening the spread.